Provisions Affecting Payroll Tax Rates

These provisions modify the current-law OASDI payroll tax rate of 12.4
percent (6.2 percent each for employees and employers). We provide a
summary list of all options in
this category. For each provision listed below, we provide an
estimate of the financial effect on the OASDI program over
the long-range period (the next 75 years) and for the 75th year. In
addition, we provide graphs and detailed single year tables.
We base all estimates on the intermediate assumptions
described in the
2011 Trustees Report.

Choose the type of estimates (summary or detailed) from
the list of provisions.

We group these provisions as follows:

E1: Increase payroll tax rate, with no changes in the taxable
maximum.

Eliminate the taxable maximum in years 2012 and later, and apply full 12.4 percent
payroll tax rate to all earnings. Provide benefit credit for earnings above the
current-law taxable maximum, adding a bend point at the current-law taxable maximum
and applying a formula factor of 3 percent for AIME above this new bend point.

Eliminate the taxable maximum for years 2018 and later (phased in 2012-2017), and apply
full 12.4 percent payroll tax rate to all earnings. Provide benefit credit for earnings
above the current-law taxable maximum that were taxed after 2011, using a secondary PIA
formula. This secondary PIA formula uses: (1) an “AIME+” derived from annual earnings
from each year after 2011 that were in excess of that year’s current-law taxable maximum;
(2) a bend point equal to 134 percent higher of the monthly current-law taxable maximum;
and (3) formula factors of 3 percent and 0.25 percent, respectively.

Apply a 2 percent payroll tax on earnings above the current-law taxable maximum for years
2014-2061, and a 3 percent rate for years 2062 and later. Do not provide benefit credit for
earnings above the current-law taxable maximum.

Eliminate the taxable maximum in years 2022 and later (phase in by applying a portion of the
payroll tax rate to earnings above the current-law taxable maximum: 1.24 percent in 2013; 2.48
percent in 2014; …; 11.16 percent in 2021). Provide benefit credit for earnings above the
current-law taxable maximum (phased in at the same proportion as the payroll tax rate during
2013-2021). Revise the benefit formula by adding a bend point at the current-law taxable
maximum and applying a formula factor of 5 percent for AIME above this new bend point.

Increase the taxable maximum each year by an additional 2 percent beginning in 2012 until
taxable earnings equal 90 percent of covered earnings. Provide benefit credit for earnings
up to the revised taxable maximum levels.

Increase the taxable maximum each year by an additional 2 percent beginning in 2014 until
taxable earnings equal 90 percent of covered earnings. Do not provide benefit credit for
additional earnings taxed.

Increase the taxable maximum by an additional 2 percent per year beginning in 2013
until taxable earnings equal 90 percent of covered earnings. Provide benefit credit
for earnings up to the revised taxable maximum levels. Create a new bend point equal
to the current-law taxable maximum with a 5 percent formula factor applying above the
new bend point.

Beginning in 2019, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $200,000 in 2017, with the threshold wage-indexed after 2019. Do not
provide benefit credit for additional earnings taxed.

Beginning in 2019, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $300,000 in 2017, with the threshold wage-indexed after 2019. Do not
provide benefit credit for additional earnings taxed.

Beginning in 2019, apply 2 percent payroll tax rate on earnings over the wage-indexed
equivalent of $400,000 in 2017, with the threshold wage-indexed after 2019. Do not
provide benefit credit for additional earnings taxed.

Eliminate the taxable maximum for the employer payroll tax (6.2 percent)
beginning in 2012. For the employee payroll tax (6.2 percent) and for benefit
calculation purposes, beginning in 2012, increase the taxable maximum by an additional
2 percent per year until taxable earnings equal 90 percent of covered earnings.